County reports increase in business license applications
April 3, 2009
Consumer confidence may be low and loans hard to come by, but the Summit County Clerk’s office saw more applications for new businesses in the first quarter of 2009 than the same period a year ago. A 23 percent increase, in fact.
In 2008, 30 percent (23 out of 78) of those new applications were for "in-home consulting." This winter that category jumped to 54 percent (51 out of 96) of the applications, said Jill Segura in the county clerk’s office.
Common sense suggests that the increase is because of, not in spite of, the recession. People without a job or finding themselves needing extra income often turn to entrepreneurship. Starting from home is convenient and offers low-overhead.
The same trend may be prompting people to grow more food at home. Sterling Banks, agricultural expert at the Utah State University Extension office in Coalville, said he’s been fielding more calls than usual from people interested in growing home gardens this year and raising chickens.
But do recessions and increased entrepreneurship go hand-in-hand?
Robert W. Fairlie, a professor in applied economics at the University of California, Santa Cruz isn’t so sure. He compiled some graphs for a book he’s working on that were published in the New York Times on March 31.
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The graphs show no correlation between recessions over the past 30 years to rising and falling rates of new business activity.
"If you were to look at total business creation rate, that’s pretty stable over the business cycle," he explained in a telephone interview on Thursday.
When unemployment is high, and start-up costs are relatively low, it’s intuitive that more people would start their own business. But conversely, when economic conditions are good, there are lots of opportunities and people take advantage of them to be their own boss and increase their earning potential.
Survival is hard for new businesses during a recession, and that scares many people off, but the temptation to accept a good wage during boom years is equally strong.
"Those two scenarios counterbalance each other. The draw of a strong labor market can actually discourage entrepreneurship," he said.
In the late 1990s, he recalls his students getting three to five offers upon graduation from companies in San Jose and the Silicon Valley at salaries higher than his own, plus signing bonuses.
"With these opposing forces, it’s not always clear which will dominate," he said.
One way this recession is different from others in the last 30 years is the credit crisis.
If it’s true that more people will turn to self-employment this year, he isn’t confident they’ll be able to get the financing needed to succeed.
The result may be a shift in the types of businesses. People out there contemplating a start-up, will likely be considering options with low overhead, he said. Unfortunately, those types of business can also be limited in long-term growth potential.
Kathy Pace of Wanship and Ashlie Allen of Park City both started new home-based businesses this winter, and neither did it because of the recession.
Pace had run a clothing pattern business from home for years. When she returned from an LDS mission last year, she decided she’d prefer wedding planning. Her company, All The Frills, did 14 events last summer and she’s excited about this summer.
"I can give a platinum wedding for less. I love to use talent and creativity. I own my own props and don’t have a lot of overhead," she said. "It feels great to be my own boss."
She can schedule appointments around family vacations and holds down another job at a chocolate shop without conflicts, she said.
Ashlie Allen started Allen Accounting Solutions in January. She had a baby eight months ago and wanted greater flexibility in her career.
Many of her clients are small businesses, some based from homes, and she said each one started for a different reason.
Some are doing OK and glad of their low overhead, others are in the construction and tourism industries and are struggling to survive, she said.
She misses a steady paycheck, but loves not having to put her son in day care.
Emily Chaney is an artist and is no stranger to running small businesses and working from home. She said she likes the networking and exposure that working in a gallery provides, but said working from home sometimes inspires people to be more creative and they bounce back from tough financial times even stronger.
She said she usually produces more work when based at home and she’s seen friends branch out and find new ways to market themselves.
"It may be helping artists become more diverse, more spread out. It could be a benefit when the market improves like an investor with a diverse portfolio," she explained.
First quarter county business license applications